Why we’re not quite ready for the hardware startup renaissance

“The Hardware Renaissance”. It’s unmissable. Paul Graham has noticed it and, certainly, my credit card has. Where once, entrepreneurs turned to software to form their ‘next big thing’, there is an increasing trend towards hardware in this space and, while many would seem to point to the likes of Kickstarter and other crowdfunding platforms as the driving force behind this shift, I believe that the credit should really be handed to two guys in Cupertino who changed the way the world feels about hardware; Steve Jobs and Jonathan Ive.

Richard Oakley is best described as a ‘media guy, entrepreneur, and full-time geek’, a role he somehow found himself in despite dedicating his varsity years at Rhodes... More

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Apple certainly wasn’t the first company to introduce people to beautifully designed and functional hardware, but I can’t think of another brand or company who have more influenced the way that the average consumer feels about the things they use. So much so, that it has ultimately become their core value proposition; simplicity and beauty. Apple, in turn, have inspired a range of startups, and indeed entrepreneurs, who have placed (hardware) design at the centre of what they do. Jack Dorsey and Square. Nest. Jawbone. The list goes on.

But producing hardware isn’t easy.

While the production process in SaaS startups is relatively straightforward, hardware production requires far more infrastructure. This, at first glance, resonates as the greatest challenge, but the truth is that the challenges that face a new breed of startup are far more complex. The exponential rise of Raspberry Pi and Arduino have, in fact, dramatically reduced the barrier to entry at a idea-prototype stage. The real issue is progressing onto the next stage of a startup.

Hardware competencies and skills largely rest within large enterprises, and while the last 20+ years have left software engineers with an entrepreneurial drive and attitude, this is less true of hardware engineers. In order for us to see a true hardware revolution, new skills need to be introduced into the startup world; those of industrial design and manufacturing. While the skills are relatively easy to attain, though, the culture required to be successful in this space isn’t.

The existing startup culture centres around some core principles of innovation, but these ideas simply do not directly translate. Imperfection is suddenly no longer tolerable. Quick iteration is far more challenging when accounting for long manufacturing, stock and shipping cycles. And a MVP can be far less ‘minimal’ when the base cost of production is so high, and the entry cost for a consumer equally so.

But it’s not all bad news.

The consumer behaviour around hardware is far more beneficial to the startup, for one. While SaaS consumer behaviour stipulates that a low price-point is required, and that consumer loyalty is largely a myth, hardware consumers are far more readied to the idea of a premium once-off price. This pricing model makes scaling a hardware business far more predictable. There is a definite profit margin per customer and as the demand for a product increases, the effect of the economies of scale is introduced, and it becomes more affordable to produce at the higher volumes. The impact of crowdfunding platforms cannot be overlooked in this respect. A definite up-front demand, which offsets the cost of production, enables a hardware startup to progress from a prototype to production phase with little risk or uncertainty.

What we really need before we can see a true “Hardware Renaissance”, though, is a scale and accessibility that doesn’t exist right now. A company to do for hardware manufacturing what Amazon Web Services did for SaaS hosting and delivery. A commoditisation of manufacturing. Hardware-(production)-as-a-service. Then, suddenly, the mismatch between hardware and software is lessened, and the startup ecosystem as a whole can benefit.